They may seem to poach your best staff, change
technology standards on a whim and make contracts impenetrable, but
it is hard to run an IT department without talking to IT
suppliers.
Since there are few with a world-wide reach, it is how a
business chooses and manages its relationship that can make the
difference between excellence and mediocrity in the global
economy.
In the last article in this series we reported on
Unilever's network outsourcing contract with
BT. According to IT research firm Gartner, this contract
provides an example of how important it is for businesses and IT
suppliers to work on their relationships.
Unilever, one of the world's largest makers of consumer goods
with annual sales of more than £27bn and more than 200,000 staff
operating in 150 countries, signed a deal in December 2002 with BT
to outsource its global communications network services. Worth
nearly £100m a year, the deal was extended last year. Neither
company had put together a global partnership of this kind
before.
Gartner research director Scott Morrison, says that there was
top-down commitment from senior management to making the
relationship work, and Unilever had to ensure buy-in at all
levels.
"Global deals need to be driven centrally, but must be
communicated and enforced throughout the organisation," he says in
a research paper. "Highly federated organisations should consider
whether their structure lends itself to such global deals."
Both sides knew that, no matter what the intentions at the
centre of Unilever, if local managers did not have the goodwill to
co-operate with the supplier, the relationship was unlikely to be a
success.
Unilever took steps to avoid this, Morrison says. "A clear
communication plan on the BT relationship was put in place for all
Unilever companies, telling them what was being done and why. This
achieved far greater levels of buy-in at the local level than was
previously the case."
Smaller firms too are finding relationships with suppliers are
essential to improving their IT performance on a global level.
Earlier this year global law firm Eversheds built on its
relationship with Computacenter and signed a £27m contract to
accelerate its worldwide IT service improvement programme and
undertake an immediate technology transformation.
The firm, which is one of the largest full-service law firms in
the world, outsourced its UK service desk, desk-side support and
datacentre hosting and management to the IT services firm.
Computacenter will manage and host the firm's datacentre
environments and provide 24x7 IT support services to 4,000 users
across Europe and Asia. Eversheds is also embarking on a server
consolidation programme across Europe.
Conor O'Brien, head of IT service delivery and operations at
Eversheds, said the firm had drawn lessons from its contract
negotiations with IT services firms.
"You have to be absolutely clear what it is you are looking to
get out of the relationship. Are you looking for a steady state or
something more innovative? From our point of view, we wanted
Computacenter to achieve a transformation quicker than we could
have done ourselves."
Although Eversheds wanted to make its current global IT services
more efficient and effective, it was also looking for help in
bringing new services to the business. This was reflected in the
contract, O'Brien says.
"We have a blended contract. We have service level agreements,
but we also have a method for focusing the supplier on innovation.
That is the big benefit for us. It is something that Computacenter
has embraced and is not afraid of."
Although innovation may be seen as quite an abstract,
qualitative term and difficult to capture in a contract, O'Brien
says the key to translating it into reality comes from knowing what
it means to your business and letting the supplier know that.
"We are very clear about what our business strategy is: how IT
can live up to that comes from Computacenter."
The contract was also structured to ensure it could meet the
needs of Eversheds' future global ambitions. "In the future, we
will want services in other offices. The ability of the
organisation to grow is essential. That is not in the scope of the
contract, but we are able to develop it."
O'Brien said the law firm's experience in putting together
contracts for its clients helped it in building on its relationship
with Computacenter.
"As a law firm we know you have to live up to the claims you
make to clients," he says. "You cannot just put a contract in a
draw and hope it will find its own way to come to life. It needs
energy, focus and the right people to ensure it works in
reality.
"From a user's perspective, it is easy to see what is in it for
you. But you have to understand and help the supplier get what it
is looking for in order to get what you want from the
relationship."
Finding the people with the right mix of technical,
communication and negotiating skills to manage these deals was
difficult, but essential, O'Brien says. "Negotiations have their
ups and downs. You have to be able to have up-front conversations
about what is acceptable and what is not, but also help in the
understanding of the way to make it right. Suppliers want to
understand and they want to make money - if you both understand
that it is mutually beneficial."
Another benefit of being in the legal sector is that the firm
has witnessed how other contracts struggle with change such as
mergers and acquisitions, which have been rife as companies seek to
grow and globalise.
"We are lucky, we give a lot of advice on mergers and
acquisitions so we have the expertise in-house and we use that to
help understand our contract with Computacenter. We have put as
much flexibility as we could into the contract. If a merger arises,
we have a way of dealing with it."
But to make a contract more flexible, it increase its cost.
Finding the right balance between flexibility and cost was one of
the keys to getting the right contract for the purpose, O'Brien
says.
Outsourcing suppliers and other IT service partners have become
more adept at managing change within their contracts, according to
Phil Morris, managing director Europe at EquaTerra, which
incorporates IT outsourcing advisors Morgan Chambers.
"There has been a massive change in attitude from IT service
suppliers," he says. "Before they might see a merger and
acquisition as an opportunity to make more money."
Communications between CIOs at a global level has meant that
outsourcing providers who are awkward or opportunistic during
mergers and acquisitions will find it more difficult to win new
contracts. This has driven suppliers to use flexibility as a
selling point, Morris says.
Offshoring has been another area that has seen improved dealings
between IT suppliers and business users, Morris says. The trend,
which allows applications development, support or even business
processes to take place far from the main users, has become a
hallmark of globalisation.
Offshoring has been growing for about 10 years and businesses
are now learning from their earlier mistakes, Morris says.
"The people that have risen to the challenge have done so in
applications. The processes have changed and resulted in much
stronger specifications and a higher view of outcomes. It was once
rubbish in and rubbish out, but the understanding of specs has
become better on both sides."
Whether outsourcing or offshoring, companies face exposing their
internal weaknesses if they do not get the relationship right by
doing the groundwork, Morris says. "The biggest challenge has been
the change in the governance of the interface between business and
IT," he says.
"Historically, that has been the pinch-point for CIOs, but when
you engage with offshoring or outsourcing on a large scale, if the
governance is not right, sooner or later you are going to have a
major problem."
As Morris suggests, despite global businesses spending billions
on IT service providers to meet their global needs, success or
failure is likely to depend as much on internal processes as the
performance of the supplier.